Barrick Gold (ABX) Message Board

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Gold/Mining/Energy : Barrick Gold (ABX)

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To: jrhana who wrote (3423)	3/9/2003 8:29:27 PM
From: Elizabeth Andrews	Read Replies (1) of 3558

I never said the Barrick hedge position was irrelevant. If gold rises it will be opportunity profit lost for Barrick but the derivative position will not cause the company's collapse or bankruptcy. Barrick's balance sheet is at risk with respect to 20% of its production if its cost of producing an ounce of gold rises above $345 per ounce and I believe that to be unlikely in the near term. That would cause loss of value to the business and negative cash flow on the derivative position. It's an optical issue that ABX has chosen to ignore for too long. But please notice that all the major gold stocks broke lower on Friday, including the unhedged GG. Why? I think it is a cost of growth issue and the NAVs are going to zero or negative regardless of what the price of gold does or what the hedge position is. it will be a new relative starting point for the group. There's a macro factor driving the valuations at this point and the NAV calculation is the only thing they all really have in common. I'm still long my Barrick position but not happy about it either. You were wise to sell yours.

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